Tamil Tiger rebels have accused the Sri Lankan army of massacring hundreds of civilians in their advance on the rebels' last stronghold in the north of the island.

They claimed at least three hundred innocent civilians had been killed and more than 600 wounded in shelling in the "no-fire zone", a seven mile coastal strip on the north-east coast of the island. A spokesman told the BBC the army was responsible for "carnage."

Sri Lankan troops have now entered the safe zone and occupied areas were cleared of civilians on Monday in what President Mahinda Rajapaksa called the "largest-ever hostage rescue mission in history".

The government denies shelling in the safe zone and claimed 35,000 had now fled the area to safety.

The United Nations voiced its fears for the safety of thousands of civilians still trapped in the zone as a government deadline for the Tigers to surrender passed at 06.30 GMT. The government had warned they would launch a final assault on their last stronghold on the island – now believed to be just 12 square miles.

Officials pleaded with the LTTE on Tuesday to release the remaining estimated 65,000 civilians trapped in a "no-fire zone" and urged the Sri Lankan government to show restraint.

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Gordon Weiss, a government spokesman, said he had received reports that desperate LTTE commanders had shot civilians trying to escape and terrorised crowds by firing at their feet. They had also forcibly recruited children into their ranks to boost their numbers as Sri Lankan troops closed in.

Government forces moved closer to victory in their 25 year war against the Tamil insurgents on Monday when they punctured a defensive "bund" – a vast ditch and earth mound – which had halted their advance.

Western diplomats said significant numbers of civilians had escaped but they were unable to confirm government claims of more than 35,000. Red Cross officials said 4,000 had crossed the front line on Monday while the pro-LTTE website, TamiNet, claimed hundreds of civilians may have been killed while fleeing fighting.

It said hundreds of dead and wounded civilians had been discovered in Maaththa'lan and Pokka'nai villages, and claimed one of its staff had personally counted 300 dead bodies.

Sri Lankan Army troops had fired cluster shells at civilians, it claimed, sending thousands fleeing towards LTTE positions while government forces had "captured" up to eight thousand civilians.

"A large majority of the civilians fled towards LTTE-held areas while around 8,000 were trapped and captured by the SLA," it claimed.

Sri Lankan Army chief Sarath Fonseka claimed "only a few" civilians now remain in the no-fly zone, while President Rajapaksa said he had snubbed an intervention from Gordon Brown and defied pressure from Western governments to show restraint.

"British Prime Minister Gordon Brown and Australian Prime Minister Kevin Rudd kept calling me during the past few days. I could not talk to them as I was busy with the New Year festivities. I ask them not to talk about a ceasefire or a pause in military operations. We gave the LTTE 48 hours but unfortunately the terrorists did not take the opportunity to free civilians," he said.